Wednesday 1 September 2010

Bank independence: Brown, Blair or Balls?

One of the more surprising claims in the Tony Blair book is that Bank of England independence was his idea, rather than Gordon Brown's.

Bloomberg have a report with the key quote.

“When I suggested it, he readily agreed,” Blair, 57, wrote in his memoir “A Journey,” published by Random House today. “I allowed Gordon to make the statement and indeed gave him every paean of praise and status in becoming the major economic figure of the government. In truth, too, as with the Bank of England independence, the broad framework of the economy, never mind anything else, was set by me.”

The Bloomberg report raises an eyebrow at this, noting that Ed Balls is usually considered to be the author of the policy:

Blair’s comments may disappoint Ed Balls, an adviser to Brown during the run-up to Labour’s 1997 election win and now a contender for the Labour leadership. Balls wrote a pamphlet for the Fabian Society, a research group linked to Labour, in 1992 advocating independence for the central bank.

Blair “probably knows that Bank of England independence was one of the defining achievements of his first term in government and, I don’t know, maybe he’ll give me a thumbs-up for that one,” Balls said in an interview last week.

Balls' claim is confirmed by the most detailed account of the build-up to Bank independence - that given by Bill Keegan of The Observer, in his very straight account of Labour economic policy-making in opposition and government, titled 'The Prudence of Gordon Brown'.

I reviewed the Keegan book back in 2003, noting of its account of Bank Independence that:

He [Keegan] recalls how shocked he and the rest of the economic commentariat were by Brown's political coup de th├ętre - making the Bank of England independent on day eight in power. Yet he also shows how long in the making the move was. Brown had first recruited his highly influential special adviser, Ed Balls, on the basis of the latter's 1992 Fabian pamphlet advocating Bank independence and a rigorous approach to economic stability. By 1995, Brown was convinced and had Blair on board. Brown's euro-caution combined a strong belief in the merits of his independent Bank with the scars of the ERM crisis.

Right of centre commentator Matthew d'Ancona, a Blair admirer, has also noted how the 1992 pamphlet sets out the macroeconomic strategy and political narrative which New Labour was to adopt. (It was also a stark warning against the risks of European monetary union for the UK).

As D'Ancona writes:

Scroll back to December 1992 when a brilliant, 25-year-old leader writer at the Financial Times called Ed Balls published a Fabian discussion document on "Euro-monetarism".

The paper, with its emphasis upon "economic stability" and demands for an end to the "boom-bust cycle", was stuffed full of phrases that would become Labour soundbites. It was also the intellectual basis for a hugely influential partnership between Balls and his subsequent boss, Mr Brown, and their joint insistence that Labour, as the party of devaluation and the 1976 IMF debt crisis, needed to construct for itself a "platform of stability".

Of course, Ed Balls - as a policy adviser before entering Parliament in 2005 - could not decide the policy and political strategy. His idea of an independent the Bank could not have been put into practice if both Brown and Blair had not agreed with it, and the broader macroeconomic and political strategy of which it was part. But the policy's genesis - and journey from Balls to Brown to Blair seems clear. A strategy which amounted to a critique of why Labour governments had fallen prey to financial crises - explaining their failure to last more than one term - would certainly have strongly appealed to Blair as well as Brown, but it is pretty difficult to see how Blair - sometime between 1992 and 1995 - could seriously claim to have alighted on the idea from another source.

Tony Blair and Ed Balls are not usually thought to form a mutual fan club.

However, Balls did nominate Blair as Labour's best leader in the party's history in the Newsnight leadership debate. And Blair himself makes this conciliatory remark about Balls in the book, noted by the Guardian's Andrew Sparrow, who is among those journalists undertaking the public service of trying to read and live-blog at the same time.

I've had some harsh things to say about Ed Balls – I thought he behaved badly at points, and was wrong on policy – but I also thought he was really able, and a talent that any political party should be grateful to have.

No comments: